The decline of the NDA will not bring an end to
India's economic progress, argues Salil Tripathi

Thursday May 13, 2004

If you travelled around India in the last few months, you would have been struck
by large posters of happy Indian farmers admiring lush, waving crops, or yuppies
talking confidently on their mobile phones, with a slogan at the bottom saying
"India shining".

It was meant to reinforce the message, not very subtly, that India had finally
emerged as an economic power, and the credit for that should go to the
government of Atal Bihari Vajpayee.

Macroeconomic indicators certainly indicated that India was, at one level,
shining. The economy had grown at around 8% for the last few years, a rate
which, if maintained, would mean the Indian economy doubling within a decade.
Growth in the 1990s had indeed lifted millions of Indians out of poverty.

Foreign reserves, once so depleted that India had to offer its gold reserves as
security to the Bank of England in order to get balance of payment support,
stood at more than $100bn (£57bn). More companies from the UK and the US were
scouting around sites in Indian cities to set up offshore back offices.

Politically, the opposition Congress party appeared to be devoid of ideas, led
by Sonia Gandhi, an apparently lacklustre leader who would never be able to
escape the phrase "Italian-born" next to her name. Relations with
Pakistan too had improved: not only did India send a cricket team to Pakistan,
it won the Test series 2-1.

That week, India went into elections, with analysts convinced that the governing
National Democratic Alliance would return to power easily. As the elections
progressed, exit polls indicated that it might get a bit more choppy, but that
the NDA would emerge victorious.

Today Mr Vajpayee resigned, his coalition having lost significant support across
many parts of the country. Some of the analysts who misread the polls are
concluding that this was a vote against the "India shining" campaign.

India is actually whining, they said, arguing that farmers in rural India were
turning against urban India; they were not mesmerised by the progress. The
Congress party, whose allies will include left-leaning parties, and possibly
even the Communist party, had promised free electricity in Andhra Pradesh (the
state where a crucial NDA ally, Chandrababu Naidu, lost office as chief
minister). So is it back to regulations and licences, subsidies and giveaways?

Not exactly. This argument is part of an older debate, of India vs Bharat, of an
upwardly-mobile, outwardly-leaning, growth-oriented India, against an apparently
slower-moving, left-leaning, immersed-in-itself Bharat, or old India, which, as
the cliché goes, lives in its villages.

But that is simplistic: if that were true, Vajpayee's Bharatiya Janata Party
should have won handsomely in the cities, which have benefited from the outward
orientation, and the Congress, which is claiming to have rediscovered rural
roots, should have done better in villages.

Instead, big cities like Bombay and Delhi have rejected the BJP, and in many
rural regions, the BJP or its allies have won. Divining the Indian electorate is
never an easy task, particularly since 1989, when the Indian polity began to
fracture and the dominance of the Congress party ended.
And it should be remembered that the growth in the Indian economy in the last
decade had its origins in 1991, when the Congress was in power. And it was a
Congress prime minister - Narasimha Rao - and his finance minister - Manmohan
Singh - who devised the blueprint of Indian economic reforms.

There were may hiccups along the way, but the foundation was laid: it allowed
Indian businesses to plan without the government looking over their shoulders;
to set up factories when they wanted; to raise capital when they wanted; to
expand overseas when needed.

It also allowed foreign businesses to own majority stakes in their Indian
subsidiaries, or set up wholly-owned companies in India. Sectors like
information technology, financial services, business process outsourcing,
pharmaceuticals, and automotive components boomed, generating thousands of jobs,
spreading prosperity beyond the big cities.

Mr Rao left office in 1996 after the Congress lost its majority, which brought
two coalitions to power. The BJP effectively gained power two years later. In
those seven years, none of these governments deviated from the master plan of
economic deregulation.

That is why the defeat of the NDA should not mean the end of India's economic
liberalisation. India's information technology boom did not begin with Mr
Vajpayee, nor will it end with his defeat.

Even if the Communist party joins the new government at the centre, it is
unlikely to roll back the reforms: in the state that the Communists have ruled
uninterrupted for nearly three decades, West Bengal, the state government wants
economic growth and jobs, even if the investors are foreign businesses.

The real challenge is for the new Indian government to ensure that the
prosperity that has been generated in the last decade increases, and that more
Indians benefit from it, by broadening the base of reforms, to include those
that are left out of the process so far. That will mean empowering those whose
expectations have been raised, and who are impatient for change.

· Salil Tripathi is a former correspondent of India Today and the Far
Eastern Economic Review.